Ex-UBS Banker Gadola Avoids Prison for Helping Tax Cheats

Nov. 18 (Bloomberg) -- Former UBS AG banker Renzo Gadola,
who aided Americans in cheating U.S. tax authorities before
helping prosecutors snare other bankers, avoided prison when a
judge sentenced him to five years of probation.

U.S. District Judge James Lawrence King in Miami rewarded
Gadola today, citing the “extraordinary cooperation you’ve
rendered to the United States.” He faced from 10 to 16 months
in prison.

“You’ve demonstrated remorse of your activities, you have
cooperated fully and the results have been extraordinary,” said
King. He cited prosecutions of several people, saying “but for
the link that was formulated by the cooperation you have given,
a great deal of this would not have happened, perhaps none of
it.”

Gadola pleaded guilty Dec. 22, admitting he serviced
hundreds of secret Swiss bank accounts at UBS from 1995 to 2008
and later as an asset manager. Prosecutors sought leniency for
Gadola, who helped build cases against two other bankers in the
U.S. crackdown on offshore tax evasion. He will help in future
grand jury probes and testify against former customers and
colleagues, prosecutors wrote to the judge.

Gadola was willing to give “information and answer
questions about his U.S. customers who used secret Swiss bank
accounts to evade their income taxes as well as the Swiss
bankers and Swiss financial advisers who aided and abetted those
U.S. customers,” prosecutors wrote.

‘Extremely Helpful’

Justice Department attorney Mark Daly told the judge today
that a Gadola client was charged this week in a tax case still
under court seal. Gadola’s cooperation was “extremely
helpful,” Daly said.

“He went through client by client, colleague by colleague,
laying out their participation in tax evasion schemes,” Daly
said. “It has not only given the government a better conception
of how it operated from the Swiss banker’s side, but as well as
how it operated from the U.S. client’s side.”

Gadola, who was free on bail, returned yesterday from
Switzerland to Miami, where he was detained at the airport
because his visa had expired, his attorney, Peter Raben, said.
Immigration officials threatened not to let him into the
country, Raben said.

“I thought it was a bit ironic that he had to try to
convince the United States that he be allowed to be sentenced
here,” Raben said. As part of his probation, Gadola must return
to the U.S. at least once a year, King ordered.

The case has changed Gadola’s life forever, Raben said.

‘Honored Citizen’

“He was an honored citizen and banker in Switzerland,”
Raben said. “That’s gone. He spent 25 years in the banking
business. That’s gone. He’s no longer going to be involved in
the financial world anywhere.”

Gadola was arrested on Nov. 7, 2010, after U.S. authorities
secretly recorded him in a Miami hotel talking to a client about
ways to hide money from the Internal Revenue Service.

Within days, he helped record phone calls with U.S.
customers who held secret Swiss bank accounts, according to
prosecutors.

Gadola is among 21 bankers, lawyers and advisers charged in
a U.S. crackdown on offshore tax evasion. He was the first
accused of discouraging taxpayers from joining an IRS program to
avoid prosecution by voluntarily disclosing their accounts. More
than three dozen taxpayers also were charged.

About 30,000 U.S. taxpayers disclosed their accounts to the
IRS since 2009, when UBS AG, the biggest Swiss bank, was charged
with helping Americans hide assets from the IRS. UBS avoided
prosecution by admitting it fostered tax evasion, paying $780
million and handing over data on 250 secret accounts. It later
disclosed another 4,450 accounts.

Second Banker

Gadola was the second banker sentenced in the U.S.
crackdown. Former UBS banker Bradley Birkenfeld, who revealed
the UBS tax scheme to U.S. authorities, was sentenced in August
2009 to 40 months in prison. He asked President Barack Obama to
reduce his sentence, saying he was treated unfairly as a
whistle-blower.

After his arrest, Gadola gave the U.S. valuable evidence
that led to criminal charges against bankers Martin Lack and
Christos Bagios, according to prosecutors.

Smaller Bank

Lack was an executive director of the UBS North America
International business until 2003, when he set up an asset
management company in Zurich, according to prosecutors.

He was indicted Aug. 2 on a charge of conspiring to help
Americans evade taxes by hiding accounts in a smaller Swiss
regional bank. Lack, a Swiss resident and independent investment
adviser, hasn’t responded in court and is considered a fugitive
by prosecutors.

Bagios was charged in January with helping 150 American
clients hide as much as $500 million in assets from the IRS when
he worked at UBS, where he spent more than 15 years. He later
worked for Credit Suisse Group AG. A Greek citizen who lived in
Switzerland, he has been free on bail.

The case is U.S. v. Gadola, 10-cr-20878, U.S. District
Court, Southern District of Florida (Miami).